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Saturday, May 28, 2011

CBPP: Misconceptions and Realities About Who Pays Taxes

The Center on Budget and Policy Priorities has released Misconceptions and Realities About Who Pays Taxes:

A recent finding by Congress’ Joint Committee on Taxation that 51% of households owed no federal income tax in 2009 is being used to advance the argument that low- and moderate-income families do not pay sufficient taxes. Apart from the fact that most of those who make this argument also call for maintaining or increasing all of the tax cuts of recent years for people at the top of the income scale, the 51% figure, its significance, and its policy implications are widely misunderstood.

Oft-Cited 51% Figure Is Temporary Spike Caused by Recession

Figure 1  

Lower-Income People Pay Considerable Payroll, State, and Local Taxes

Figure 2  

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Comments

Conflation of different taxes to justify a higher incomer tax as opposed to a lowering of taxes in general. I guess this is what passes for intellectual thought in Leftist circles.

Posted by: Chris Bolts | May 29, 2011 12:51:54 PM

They are really scraping the bottom of the barrel trying to show the lower income groups pay a lot of taxes. Excise taxes? Does this include alcohol taxes or just FET on tires and fishing lures? And how does that 1.6% of income paid in payroll taxes by the top 1% compare to the aggregate amount paid by the other groups? CBPP, while you're doing this, ignore the non-payroll income of the top group. By the way, remember that part of the payroll tax will be imposed without limit on compensation in excess of $250,000 after 2012.

Posted by: TexEcon | May 30, 2011 8:44:27 AM

I never get analyses like these two. First, CBPP (which always reminds me of CCCP, Russian for the old USSR - not coincidentally, I think) says that while some don't pay income tax, they do pay excise tax. This is like saying to your Mom, "No, I didn't watch my little brother, but I fed the cat." What does the one have to do with the other?

Second, they say that 51% not paying income tax is just a short-term deviation from the norm. How do they know? And even if it is, that doesn't render it meaningless. A mild heart attack is a short-term deviation from the norm, but if you ignore it and go on with your smoking and fast food, it's likely to happen again.

Posted by: MochaLite | May 30, 2011 1:42:30 PM

The analysis also doesn't mention that payroll taxes are refunded to many low-income taxpayers through the Earned Income Tax Credit, so even if the taxes are paid, many people get them back, including part of the employer paid taxes.

Posted by: NOLA | May 31, 2011 5:52:03 AM